Al-Falih: We Have Quadrupled Foreign Investment Flows

25 May 2022, Switzerland, Davos: Khalid al-Falih, Minister of Investment of Saudi Arabia, speaks during the "Saudi Arabia Outlook" session at the World Economic Forum Annual Meeting in Davos-Klosters. (World Economic Forum/dpa)
25 May 2022, Switzerland, Davos: Khalid al-Falih, Minister of Investment of Saudi Arabia, speaks during the "Saudi Arabia Outlook" session at the World Economic Forum Annual Meeting in Davos-Klosters. (World Economic Forum/dpa)
TT
20

Al-Falih: We Have Quadrupled Foreign Investment Flows

25 May 2022, Switzerland, Davos: Khalid al-Falih, Minister of Investment of Saudi Arabia, speaks during the "Saudi Arabia Outlook" session at the World Economic Forum Annual Meeting in Davos-Klosters. (World Economic Forum/dpa)
25 May 2022, Switzerland, Davos: Khalid al-Falih, Minister of Investment of Saudi Arabia, speaks during the "Saudi Arabia Outlook" session at the World Economic Forum Annual Meeting in Davos-Klosters. (World Economic Forum/dpa)

It might seem somewhat strange for one of the biggest electric car producers to open a factory in one of the world’s major oil-producing countries, but it actually boils down to the story of the most exciting economic transformation of the 21st century.

“It is one of the most exciting projects for us, and a project that I am personally proud of,” said Saudi Investment Minister Khalid al-Falih about Lucid Motors opening a factory for assembling electric automobiles in Saudi Arabia.

During an interview with Asharq Al-Awsat on the sidelines of the World Economic Forum in Davos, al-Falih said that he expects the size of the Saudi economy to grow to between $1.7 and $1.8 trillion by 2030, placing Saudi Arabia among the 15 largest economies in the world.

Al-Falih praised significant improvement in the performance of investment indicators. He pointed out the doubling of foreign direct investment flows by about four times in recent years.

The minister highlighted the series of reforms pursued by Saudi Arabia in its business environment and investment systems.

He also revealed that Saudi Arabia aims to attract more than $100 billion in foreign investments by 2030.

A trillion dollar economy

Voicing great optimism about economic growth in the Kingdom, al-Falih said the Saudi economy is on the right path to cross the threshold of one trillion dollars in 2022, compared to about $650 billion before launching its national economic transformation plan Vision 2030.

In addition to economic growth, he stressed the importance of examining the composition of the Saudi economy.

“The oil and gas sector will remain important during the next three decades and will continue to grow, but its contribution to the economy will decline,” he went on to say.

“The year 2021, for example, witnessed a growth of non-oil activities by 6%, while the growth of oil activities amounted to about 0.2% due to the consequences of the coronavirus pandemic,” he added.

Promising sectors

The minister expected non-oil industries to grow significantly in the coming years, pointing out that the contribution of the tourism sector, for example, to the gross domestic product will exceed 10% by 2030.

Al-Falih believes that the growth of new and promising sectors would contribute to stimulating investment in entire value chains, such as: tourism, hotels, entertainment, retail, logistics, culture, and others.

He shed light on the importance of the information technology sector, adding that it is expected to witness significant growth in coming years.

“As a sector in itself, it provides infrastructure that serves all other sectors,” said the minister, citing the two examples of financial technology (Fintech) and e-commerce.

Moreover, al-Falih highlighted the importance of the logistics sector as one of the promising sectors in the plan for growth and diversification of the Saudi economy.

He predicted that significant investments will be made in this sector, which includes several areas such as transporting people, goods, and commodities, and distributing parcels by air, sea, and land.

Al-Falih also believes that the value chains associated with the health sector are “very large,” and include scientific research, entrepreneurship, health technology, and others.

The official pointed to some other sectors that will play a pivotal role in supporting growth. They include education, modern agriculture, and water.

“We traditionally view them as a burden on the state, but this will transform as they witness privatization, and become attractive to investment. This will allow these sectors to generate their own revenue,” al-Falih told Asharq Al-Awsat.

Renewable energy

Despite predicting a growing demand for oil and gas on a world scale, al-Falih explained that the new restructuring of the Saudi economy necessitates the growth of renewable energy at a rate greater than oil and gas.

Renewable energy sources, whether solar or wind, aim to produce electricity with a capacity that meets 50% of domestic demand in the medium term, clarified al-Falih, adding that there are plans for converting it into energy for export through interconnection cables .

Factors encouraging investment

Al-Falih underscored the important role played by private investments, part of which is led by the Public Investment Fund, in developing economic sectors.

The minister considered that the regulatory environment may be the first obstacle to foreign investment in some sectors, pointing to the most prominent reforms that have been pursued in terms of improving the investment atmosphere.

“We have made it possible for foreign investors to have full ownership of businesses in most sectors, access investment opportunities and conclude partnerships with Saudi investors if they wish to do so,” said al-Falih.

“We have also facilitated entering the Saudi market and obtaining licenses,” he added.

Al-Falih said his ministry is working today to ensure clarity and transparency in all sectoral strategies which are available online in both Arabic and English.

“I am proud that we have been able to multiply foreign investment flows in the Kingdom by about four-fold in recent years (from about $ 5 billion to $ 20 billion in 2021),” he remarked.

He revealed that Saudi Arabia aims to attract more than $100 billion in foreign investments by 2030, pointing out that work is in full swing to enhance investment incentives in non-traditional knowledge-based sectors (such as health technology, education and modern agriculture), by strengthening digital infrastructure, talent development, and research.



Investors Weigh Market Risks as Israeli-Iranian Tensions Rise

Traders monitoring the movement of stocks on Wall Street (Reuters)
Traders monitoring the movement of stocks on Wall Street (Reuters)
TT
20

Investors Weigh Market Risks as Israeli-Iranian Tensions Rise

Traders monitoring the movement of stocks on Wall Street (Reuters)
Traders monitoring the movement of stocks on Wall Street (Reuters)

As the conflict between Israel and Iran escalates, investors are analyzing several potential market scenarios, especially if the United States deepens its involvement. A key concern is a sharp increase in energy prices, which could amplify economic consequences across global markets.

Rising oil prices could fuel inflation, weaken consumer confidence, and diminish the likelihood of interest rate cuts in the near term. This may prompt initial stock market sell-offs and a flight to the US dollar as a safe-haven asset.

While US crude oil prices have surged by around 10% over the past week, the S&P 500 index has remained relatively stable, following a brief decline after the initial Israeli strikes.

Analysts suggest that if Iranian oil supplies are disrupted, market reactions could intensify significantly. A serious supply disruption would likely ripple through global petroleum markets and push oil prices higher, leading to broader economic consequences.

Oxford Economics has outlined three possible scenarios: a de-escalation of conflict, a full suspension of Iranian oil production, and the closure of the Strait of Hormuz. Each scenario carries escalating risks to global oil prices. In the most severe case, prices could soar to $130 per barrel, pushing US inflation to nearly 6% by year-end. In such a scenario, consumer spending would likely contract due to declining real income, and any possibility of interest rate cuts this year would likely vanish under rising inflationary pressure.

So far, the most direct impact has been felt in oil markets, where Brent crude futures have jumped as much as 18% since June 10, reaching nearly $79 a barrel, the highest level in five months. Volatility expectations in the oil market now exceed those of major asset classes like equities and bonds.

Although equities have largely brushed off the geopolitical turmoil, analysts believe this could change if energy prices continue to climb. Rising oil prices could weigh on corporate earnings and consumer demand, indirectly pressuring stock markets.

While US stocks have held steady for now, further American involvement in the conflict could spark market anxiety. Historical patterns suggest any sell-off might be short-lived. For instance, during the 2003 Iraq invasion, stocks initially dropped but recovered in subsequent months.

As for the US dollar, its performance amid escalating tensions could vary. It may strengthen initially due to safe-haven demand, although past conflicts have sometimes led to long-term weakness, especially during prolonged military engagements.